@Peter Lantos, I agree that an ethical advisor will put the client's interests first however I have worked in areas of the industry where that is not possible. Many advisors are limited on the products they are able to sell and though they may believe in lower cost alternatives, they are not able to bring them to the table.

These regulations will cause advisors to be more transparent about their fees thereby giving client's the information and incentive to go out and find those products that provide better value to them.

There is nobody in this industry who will ever do what they do for nothing. Not even the regulators. It will get more and more difficult for people to get help starting out because the fees will either be crazy over the top or no one will take them on. It is what has happened in UK and AU.

When your are making mortgage payments, car payments and trying to accumulate money especially if you are hard pressed it is almost humanly impossible to put the investors interest first. When you start out in this business and you have to depend on commissions to pay the rent buy the food your human instincts will be hard to over ride.

In regards to Jim's comments stating, it is almost humanly impossible to put the investors interest first, those are exactly the type of individuals that need not be in this business. We should not be punishing the ethical law abiding advisors for the misconduct of non-ethical advisors. Regulators should seek out those unethical advisors and enforce the regulations on them or remove them from our industry.

Sorry Jim, I do not agree! Every business takes a lot of blood, sweat and tears to get off the ground.The reason most businesses (and advisors) fail at the beginning is a lack of capitalization or cashflow to carry them through the first 2 to 3 years.Human instincts are not hard to override at all.Just take care of your clients and they will take care of you! You cannot buy integrity!As for Niki's comments, I have done a lot of "free" work for many of my clients over the years. My reward over time was referrals and testimonials. I would be interested to know how many of these regulators have ever worked in the field as an advisor for more than 1 year?

embedded commissions are not the problem it is ethics. make all trailer fees identical, this will help in eliminating poor choices, but go after the unethical advisors vigorously. They are the problem and part time advisors as well.

Ethics is the issue, trailer fees are not, They have proven in the UK an AU, that when those fees were removed, the smaller clients received less advice and service. Get rid of the unethical advisors and part time advisors, those working alternate jobs. Standardize the trailer fees across the board, so there is no difference between bond funds and equities, or make the trailer fee transparent. Canadians will not pay a user fee in general, some will most will not.

Nikki is correct. The small investor will not be able to get good quality time with an advisor if we were to follow the UK and AU models. I provide people with free advice and consultations regularly. If we were to move to a strictly fee based model then I would no longer be able to provide as much free time. The high income earners may end up paying less in overall fees, but, it would be to the detriment of the lower income earners. We are going to help one group of people at the expense of the least fortunate group of people. It seems very un-Canadian.

Thanks for all of your comments. Every one is right on, but how do we get rid of unethical advisors? How do we fix this? Some companies prohibit advisors from going out side the proprietary funds. Some companies provide bonuses for staying inside the provider which of course creates a conflict of interest for the advisor. So do the regulators regulate the provider? Does the lack of training and knowledge contribute to unethical practices? After all it does not take much to be called a Financial Advisor, A life insurance license is all you need to become a financial advisor within some insurance companies. Why do we have to disclose commissions and not qualifications to be an advisor? Does Canada need a fiduciary rule?

standardize the trailer fees, proprietary funds are not really an issue, That is what the banks offer and a lot of MER's are inline with what the banks charge, and they don't pay out the trailers, so why are their fees so high. a standard MER could also be implemented across the board, based on industry benchmarks, this would also solve the issue. They have of late started with stiffer fines, however there should be more license revocations, most of the suspensions are obvious unethical practices, the fines mean nothing at that point, unless they actually do take the license away for flagrant violations. not just the big headline grabbing cases, since there are a bunch of Minnie Berne Madoffs out there.

All great comments. I especially like the one by Jim in regards to getting rid of all of the unethical advisors. At issue is how do we look and tell the difference because we are all business people. It is not like the ethical ones are sprouting wings and you can see the ethical ones from the unethical ones. Wait a second, what are these bumps on my shoulders? Let me take a look in the mirror. Holy cow Batman! Whoops! It looks a tad pinkish... . Not red though. Must be because I am in business in the first place. I wonder if people would go after the business that sells jeans in the same manner as they go after the investment industry? "Hey! You made 500% on those things, and they are already worn out!" And what about the food industry? "Hey! commodities have gone down and yet the prices keep going up! And after ten sprays per season we get the added bonus of carcinogens!"

I totally agree, unethical advisors are the problem. Penalties should be much more severe for flagrant violations, and repeat offenders should be permanently banned from the industry. Also, the managers of the unethical advisors should be held jointly responsible for the misconduct of any of the advisors they oversee. KYC, Investor Profile, Needs Analysis must all be taken into account. Punishing the entire industry and punishing the ethical advisors is the non-creative lazy person's solution. Just because this is what they choose in the UK and AU it does not mean we must follow. Hopefully, we can show them how to do it right.

Now that we all agree that unethical advisors need to be expelled from the business we love how do we define an unethical advisor? Holding yourself out as a Financial Advisor but you have no training nor experience to be would be unethical. What else? It is easy to be an advisor but damn hard to be a good advisor. Where do we go from here?

Unethical advisors .... let start by looking at the top of the corporate ladder and the overall culture of a corporation.I have been around long enough to see many companies (executives and managers) look the other way as long a large volume of sales are coming through the door. (Executives and management bonuses are based on production). So perhaps top and middle management should also memorize and adhere to their own Code of Conduct and Integrity guidelines (that are designed for the advisors).

I don't think we should generalize by implying that everyone in the corporate ladder is somehow unethical. I have dealt with ethical executives and non-ethical executives. In fact, one very unethical VP is no longer a VP anywhere else partly as a result of a complaint I lodged against him. Another VP I had made a complaint to actually flew in from TO to Montreal to listen to me and my associates regarding a complaint affecting our customers. A very reasonable resolution was arrived at. I would say that most of the executives and account managers I deal with are ethical. Part of the problem, as with most businesses, is that the industry mostly recognizes the sales leaders as opposed to ethical leaders. Banks measure and reward their bankers based on ever increasing quotas. Investment dealers and insurers measure their reps similarly, but, with outlandish rewards to their top sales people, thankfully, a practice that is being phased out by insurers.

I think the emphasis has to be not just on the individual advisor but alos the corporate culture. Case in point--the recent lay-offs of advisors at a bank --name withheld-- due to the fact that they did not drum up sufficient business. If someone fears for their job security--when it makes them more money or not--this puts them and their behavior at risk. Most firms have a quota for advisors and if they do not meet them, their performance is stated as unsatisfactory and they are let go. Advisors promise to be there, and then they are let go. This is the kind of insult that can push an individual right off the edge into who knows what? It is not illegal for a firm to lay off a pile of their employees, however it is unethical to put them on that kind of a treadmill which they know full well will push people to do things they would not want to do in the first place. So a ban on trailers, deferred sales charges and commission quotas goes hand in hand. So what does that all mean?

Corporate culture of those institutions that only value sales quotas should be dealt with. But, taking trailer fees away from all of us is not the answer. Why would we want to punish the ethical advisor who puts their clients first? I never understood this. The ethical advisor should be supported not punished. I know of a firm who had to have every single sale across Canada verified by auditors for compliance purposes. Maybe all firms need to be put through this exercise. I believe it has made a huge difference as everyone at this firm now talks about compliance and making sales that are appropirate for the customers. I don't want to mention their name as I don't believe they were any worse than any other firm.

I believe the case in point is not really about getting rid of fees, but about clients knowing exactly what they are paying for and how much they are paying to whom. So the move ought to be done with a push to fee based so that one is not dropped without the other being implemented. So this means that you will not be punished, unless you are unable under your present structure to charge fees. Overall, the intention is also to reduce costs. If an F class mutual fund is .75 and your fee is 1%, and a commission is 2%, then how are you penalized? I am just saying--not that I am quoting anything more than hypothetical at this point. OK--you can call it pure garbage--but there needs to be an amicable solution somewhere in there where the industry doesn't automatically fire all its best people and push people onto EI.

The industry will be in turmoil in 15 years. Most advisors in Canada of today will be retired and nobody is entering the industry. High cost, over- regulation who would want to be an advisor. Pretty much nobody. It will be hard to get an advisor. So who are these regulators who are making all these rules and regulations that effectively act as barriers of entry to younger would be advisors. All lawyers appointed by the provinces to protect the public. Now they want to eliminate commissions from the industry. So let me get this right nobody gets paid equals very few advisors left. Smaller clients be damned go to the waiting banks. Oh they pay salaries not commissions to their employees who sell what bank funds! Also they transfer them around every couple of years so you never develop a relationship. Sell our new Emerging Market Fund here's some lotto tickets for the highest sales. Been there . A successful trillion dollar industry screwed up by a bunch of appointed lawyers with no industry experience! Job losses, business 's worthless, nobody left to serve the public. Can the public afford the regulators who are there to protect them from buying mutual funds a product they have put a Trillion dollars in already? What is the cost already of all this regulation and Gst which financial services were suppose to be exempt from?

Let us not forget that we are gatekeepers, both providing access to the capital markets.

'Who are these regulator?'s is an excellent question! Is it their goal to decrease the number of advisors out there? Is it the goal to reduce the numbers of advisors, decrease the access to proper capital markets and individualized plans, for what aim? To discourage investment in our lovely country? To what purpose? To ruin our free capital society? Sounds more like they do not like the capital markets in the first place.

Just saying!

With fewer access to capital market points, this means that fewer people will be accessing the capital markets--well except through their robotic-advisor.

And you are absolutely correct about the age of advisors--yup all getting up there nearing or at or beyond the retirement age. Not to say that there is a problem with old-timers being in the industry--but succession is important in any industry. Access for new folks is a real challenge. New folks at any age for that matter.

And it all started with the question of appropriate advice.

Just because they can change whatever it is they are proposing, and just because it is a difficult decision, does not mean that it is a right decision. Seems to me, the change in regulations, means that the question needs to be pushed back to the regulators as to whether what they are proposing is ethical in the first place. If wrong comes to people as a result--then ergo it is unethical.

I have paid a lot of money for my investments. I know that. There is really no point in knowing how much it costs--the same as it does not matter whether I know how much my Dr is paid for his service. At the end of the day medical and financial health all matters most.

Rick, I believe that most regulators and industry lawyers are as well intentioned as the ethical advisors. But, as with us ethical advisors they are not quite sure how to better protect the public from the unethical advisors. The difference is that the regulators and industry lawyers have more power than us to force changes onto the market and unfortunately they are following the path of least resistance. I believe that CRM2 represents a good step forward for fee transparency and the regulators should give this at least a few years to see what impact it has on the market before they put many of the ethical advisors out of business. In regards to young people entering the financial services business, yes, this is a challenge and it will increase the cost of provide services in the future when you factor in all of the other advice ethical advisors provide their clients free of charge. But, regulators will have to think outside the box to figure this one out.

The death of the independent advisor is imminent within the next 10 to 15 years.

Compliance and regulations will bury us all alive! This will no doubt be to the detriment of most Canadian investors. Only the wealthy will be able to afford true independent advice.

So who will be left to offer advice to the remaining 95% of the population? The banks will hire an army of young fresh-out-of-university salaried "advisors" to push their high margin proprietary products.

There will also be a slew of robo-advisors. I wonder if robo-advisors will need to have E&O? Imagine the lawyers taking the robo-advisors to court! Who will be accountable and responsible if the robo's advice is incorrect or results in financial losses to the investors?

The current situation is akin to Brexit. Our regulators (who have never worked outside their ivory towers in their life) keep piling on more compliance and regulations but really don't know where this is all going.

In the UK, now that they have decided to exit the EU, all the party leaders are resigning, because they have no idea (or plan) on how to actually make the exit work!

Niki, the regulators are acting on behalf of the people who have the most influence on them, nevertheless, I don't think they are robots! At least not yet. Unfortunately, we, the ethical advisors have not figured out how to have a much larger influence on their decision making. In regards to them perhaps being anti-markets I offer the following: A trailer of 1% on a big account, let's say $1 Million of investments results in trailer fees of $10K a year. On a smaller account, let's say $100K, trailer fees are $1000 a year. Given that most accounts are smaller as opposed to larger why would any regulator want to mess with this formula? Given that most accounts are "small" as opposed to "large" the biggest benefit of punishing the ethical advisors would be for the larger investor and not the smaller investor. Can the small investor get quality advice from an advisor for $1000 a year? I don't think so and even if they could how much would they save, a couple of hundred dollars a year? Of course, the wealthier person could save thousands of dollars per year. But, why would the regulators be so interested in helping out the wealthier investor to the detriment of the smaller investor?? Also, I think the trailer fee system is an excellent example of trickle down economics. It helps create and support a middle class and upper middle class in Canada. Ultimately, the wealthy investor already has so many choices in the market. The regulators would inadvertently be contributing to the "rich-get-richer" and the "poor-stay-poor" philosophy. I have been ethical and compliant which has allowed me to make a good upper class living from absolutely nothing. As well, I have developed friendships with clients that I would never have had without this profession. We need to protect this business and not torch it for the sins of the few. I believe it is simply a question of pointing out to the regulators that the people they will be helping most are the ones who need the least help in our society. In exchange we need to agree to more audits and possibly more regulations to keep the unethical ones out of our industry.

The suggestion by John DeGoey, portfolio manager at Industrial Alliance Securities Inc., “The industry is fat and happy and making money, ....", is both idiotic and naive. Although we are transitioning our businesses to meet the challenges of a new regulatory framework, it's again naive to suggest that it's either easy or anything less than disruptive, and possibly destructive to the our client relationships. His comment "... you can still give the client a bill for 1%, and the quantum of payment is unchanged" suggests that 'how' clients pay for advice is immaterial. It's not. What about all of our clients who are both fully aware and happy with the way things are structured. Clients now have choice, and informed choice. Clients/people generally do not respond well to having choice taken away.

Also, to suggest that certain investment products are better simply because they're either cheaper or simply different is ridiculous.

Mark, I would say not only would the elimination of trailer fees be disruptive, I believe it would be destructive to the average Canadian and to most advisors. We must keep in mind where John DeGoey is coming from. I believe his focus is on managing accounts worth a minimum of $500K and I believe most of his business is fee based so to a certain extent he is touting his own horn. Whenever he comments on our industry his bias towards higher net worth Canadians should be pointed out very clearly as I don't believe his comments are appropriate for the vast majority of Canadian investors. An ethical advisor would point this out upfront every single time. It is also interesting to note that he got his start in the mutual fund business when back load fees were the norm. I wonder if he would have entered the business or succeeded if not for the back load and trailer fees?

Apparently in the UK, Advisors have become a lot like lawyers, working out of legal offices, and providing advice at around 350 pounds per hour. I could do that. Just think--balance an account, get paid for the actual work and not hold anything under management? Sounds OK. Not as good as it is now--just OK.

Just a thought. If we do not understand what is going to happen, just wait till the stuff hits the fan and our clients, who say they do not understand right now, get another not so great explanation when we are notified all of a sudden as to what is really happening next. The Industry is going to see massive attrition and after the fact few jobs will be created. And less money into capital markets. Fewer people will be getting ready for retirement, because fewer advisors will be out there conveying the message to pay yourself first and plan for retirement.

I do hope I am wrong about that because it simply does not bode well for the Millenials and generation X.

Nikki, it sounds horrible for me and my clients. In my case, as I had said previously, many of my clients have become friends. In fact, one of my best friends started out as a client about 25 years ago. Both, our friendship and our net worths have growth substantially over this time and we give each other partial credit for our financial success in life. This happens because we sit at a table whether it be at there homes, or my home office, or at a restaurant and we get to truly know each other instead of watching our clocks. In fact, he was just at my home office this morning! We are supposed to be teaching our clients to let time work for them and not against them. Lawyers offices are for when there are problems. Financial advisors offices are for when we want to get on proper paths towards our long term financial goals. Let's figure out how to make it easier for lawyers to put the unethical advisors out of their offices instead.

Rino, This Winter/Fall the fees paid by third parties to you will be posted on their statements. How horrible will that be? While being friends, you have been compensated for your work for a long time--sort of friend with benefits. I am not opposed to that. If you have not had the conversation with your clients/friends about the embedded fees, it sounds to me like something you may want to do, while dangling a fishing line and having a beer. Discussing costs does become more difficult with friends, and the fear of losing a client is one thing, but a best friend as well, that is high stress. At the end of the day we have no say whatsoever in what the regulators plan to do and will do--so we have to make the best of whatever they decide--or retire--or choose a different way to do business. At the end of the day Rino, you are running a business--specifically, a for profit business and not for philanthropic purposes. I think the regulators have forgotten that we have to eat, and there is no way on earth I would do this work without getting paid to do the job. If they want to volunteer, then they should sign over their paychecks and lead by example. After all, at the end of their day, the money they get paid, comes from the business we do, and that comes from the third parties, fees and commissions, which are paid for by our clients--best friends or otherwise. As for whether I like it or not, I know that no matter what happens, I will be an entrepreneur. And maybe make more than what I do now. My friends will still be my friends.

My clients, including my friends, are well aware that I collect a trailer of about 1/2% a year on their accounts. This includes my buddy from this morning who has over $500K through me. He had another advisor when I first met him, and he had money with his local bank branch, but, getting comprehensive service was always a challenge. I suppose if I wanted to be totally unbiased I would encourage him to consult a fee based only advisor as it is the only type of advisor he has not dealt with. But, given the choice, which clients already have, the vast majority of my clients will not leave me. I have only lost 1 cleint to a fee based advisor over the past 26 years. If fee based advisors were such a good deal they would not need the regulators to push investors there way. When it comes to money most people eventually find their way to the best deal the market has to offer. I don't think this issue is a done deal. Regulators are not supposed to be in the business of taking away consumer options, they are there to regulate whatever activity exists in the market...at least I hope.

We are all being pushed to being fee based. There is not doubt in my mind that that is true.

I believe that what is important is that within the Industry, that clients have options. So either, or, both. Clients are not babies--thought they are being treated as such through paternalization.

At the end of the day, those who have advisors have higher return and more put away, while their behavior has been managed.

It is in the clients best interest to have an advisor. Stats show that those without, including the self advised discount brokerages have 3$ less on average. And much less at the end of their lives.

You know that and I know that.

Those who are poor stay poor because they do not take advice in the first place, so they will not be as affected. Though we are in wealth development to a certain extent, it is so true that "there are none so blind as those who will not see". Although that statement was about souls, we are in the business of saving peoples money. It is a statement ergo about peoples human conditions.

Those who want to have advice, who recognize the importance of advice, will seek it out. They are the ones who would not stay poor over their lifetimes. They listen. And those who choose to go the lazy way, with lazy advisors or robo-advisors get what they get.

Micky-dees anyone?

In terms of ethical, the regulators need to answer the questions as to whether their end game is actually ethical. The elimination of the FA outside the massive players will be a result and if that is what they are doing, then those who are going to be affected will need to figure out what else to do as being an FA will no longer be an option for them.

Rino--it is going to be forced attrition. There is no doubt in my mind about that. At the end of the day, what they do may have started out being about ethics, but at the end of the day, I am not sure any of our ethics has anything to do with what they are going to implement. They will do it because it is legal, a difficult decision, right or wrong. One cannot do right and have wrong results--but that is what is going to happen.

Advisors will now be required to fully disclose our commissions, fees and trailers to all of our clients.

I guess I will now also have to figure out exactly what my total expenses are, including unpaid time to prepare for each and every meeting, months and years of study time to gain the expertise I now have, travel time to meetings, time spent with clients, time training staff, and hours spent filling out compliance and regulations paperwork.

For the sake of total transparency, I think it is only fair that the regulators tell us (advisors); 1) what their qualifications and experience are to be regulators, and 2) what their total compensation is; i.e. base salary + bonus + expense accounts they each get.

And perhaps it would be nice if some advisors sat on their advisory board to provide feedback from the real live world of advisors!

The dealer and fund company should also be required to disclose their fees, commissions and bonuses. If we are going to disclose lets do it properly so investors really know where the fees are going. Some MERS are 20% NAV so where does the 20% go? Advisors only get a small fraction of that what does the dealer get and everybody else involved?

Peter, I agree! The hours I put in to serve my client's best interests is enormous, but, I want my clients to succeed. If they succeed then I too will succeed. As for the regulators, I don't begrudge the fact that the significant taxes I pay helps cover their salaries and benefits, but, yes, if we are talking about compensation then they too should have to state their total compensation package along with their qualifications. As well, they should have to clearly specify what is the problem they are addressing? High fees? In comparison to what exactly? Because investing without an advisor is already available to the public. The shift towards self-directed accounts and ETF's is already taking place without any push from the regulators, just friendly Canadian non-seismic market forces at work. This is in spite of the fact that long term studies show that most of the do-it-yourself investors underperform the general market indicies quite substantially. Putting tens of thousands, if not more financial advisors out of business will NOT improve the financial situation of most Canadians. Most Canadians will not save and invest as much money as they would when guided by a financial advisor. Yes, the financial advisor has their own motivations, but, when was self-motivation such a sin?? The only Canadians that might do a little better are those better off Canadians who ALREADY have access to fee based advisors. We can assume that if the pool of fee based advisors experiences a sudden surge then fees will drop at the expense of the small advisor.

People who will invest will no matter what the limitations and perceptions. Having said that, I have felt from the beginning that moving from embedded to fee based was like taking sand from over here and moving it over there. A plus B equals B plus A. If it were truly in the best interests of clients, then there really would be a difference. At the end of the day, by creating a really massive mountain that stops new folks from getting into the industry, greater power and control will be placed into the hands of those who can hire more at lower wages. It is the very same 80/20 principle. And at the end of the day, by having fewer people, and power centralized, there will become a greater gap between those who have and those who have not. The competition between the banks and the brokerages will continue, with banks squeezing out more cash into lowest paying GICs to the banks benefit. This is not new. The gap between the wealthy and poorest will continue. Mind you, someone born into welfare in Canada is wealthy compared to those born in NA 150 years ago--by and large. There has never been nor will be a situation where intended changes for equality and client best interest will result in the development of greater wealth amongst the poorer folks in this country. It is because those who don't invest, won't invest, because they never have, and the costs being disclosed on their statements will make them sell so that they don't pay anything--so they think. It is poor mentality which thinks otherwise.

Yesterday, something incredible happened, Rob Carrick, actually wrote, “I accept some blame for the misunderstandings out there about the cost of advice, and maybe some other financial writers will, too. The net result of our interactions with people is the emergence of a cohort that believes advice just gets in the way of them paying the lowest possible fees.”

I have found Rob Carrick’s comments in the past to be incredibly self-serving and incredibly unbalanced. But, thank you Rob, if I may call you by your first name. Thank you from all of us ethical financial advisors.

We all know that the best products and services normally do not come at the lowest prices just as your articles are not made available at the lowest prices either.

Rob Carrick also wrote, “The investment industry also has to own up to the fact that many of its so-called advisers are really just salespeople hustling mutual funds. They’re financial advisers like the sales guy at the La-Z-Boy store is an interior decorator.”

Does this mean we should be putting most people who sell La-Z-Boy’s out of business because some of them pretend to be interior decorators? Yes, these days we can buy La-Z-Boy’s online, but, what about those consumers who prefer to touch, feel, and discuss the pros & cons of different La-Z-Boy’s in person with a sales rep? If more people buy online then eventually there will be less of a need for La-Z-Boy sales reps and attrition will take place in the market place.

We understand what was meant by the La-Z-Boy analogy and many ethical financial advisors would agree. But, putting us out of business is not the solution. It will not protect the consumer. It will not lower costs for the average consumer. It will not increase the savings rate. It will not make Canadians more financially secure. And, it will be devastating to many financial advisors with the corresponding costs to the Canadian economy.

Before regulators destroy our careers and livelihoods they should first figure out why it is that certain non-licensed advisors are able to run Ponzi type schemes for years without detection? And why once caught and convicted they are given such short jail sentences? Why are managers not held responsible for the unethical behaviour of advisors on their teams? Should advisors and managers in the financial services industry be rewarded based on meeting sales quotas?

Rob, based on my limited KYC and Profile information on you I would still classify you as having an Aggressive Profile and it will take quite a few more well balanced articles from you before I can reclassify you as a well Balanced reporter.